Having had a chance to sleep on it, the correlation of 0.88 between the change in GLD inventories and the change in the price of gold still seems really amazing.
I got up this morning and started testing segments of the history. The last twelve months is obviously the most important. The correlation is still quite high at 0.75.
Lots of analysts are asking question about whether gold has bottomed out after a four year bear market. Given the importance of the gold ETFs in determining and or reflecting changes in the pricing of gold, I think that changes in inventory is a good place to watch.
At the moment I think that the data is inconclusive.
